So my husband always says that I am egging the dog on by laughing at her because she knows I am laughing at her. Does anyone think this is true?
Say, for example, if she steals my sock or something and I am laughing at her, is this reinforcing the behavior?
Sometimes I can't help it she is so damn cute!

I don't think they know you are "laughing at them", but I would say they can definitely distinguish the difference in laughing vs. angry. I know mine can. Yesterday, Ben wanted my water bottle he ran around acting so goofy, the more I laughed it seemed the goofier he got. For some reason Maddie thought it would be great fun too, and they ran around chasing each other having the best time. Considering she seldom plays, it was hilarious, seemed the funnier I thought it was the more they entertained. I think it's more of an the tones/actions they pick up on, rather than actually knowing your laughing.. What I'm trying to say probably doesn't make a lick of sense either.

Yes, though I'd have to say by laughing at her she will continue to get your sock, and your encouraging the behavior. Where if you told her NO, and gave her something acceptable you wouldn't be. Just my opinion, if you can decipher it..

I do think they know. Years ago Teddy my older dog had gone to the groomer and came back with a ridiculous haircut. They made him look like a lion. My husband came home and started hysterically laughing at him and he hid in our bedroom for an hour. It is very unlike him to hide from us.